Well there may be some China problems to come, but I cannot believe that the whole country is awash in this sort of corruption. It is interesting that the market was sabotaged by an Asian play once before, but the suspicion is that the usual suspects were domestic in the first instance. I don't think the market will be anywhere near as affected by this even if it turns out to be a real scam and not just a bit of finagling.
The stories about Chinese miners going into tunnels and coming out with gold "everyone could see" are quaint. This seems to ring true, but is unverifiable in any technical way unless the company wants to do a demonstration video, a thing which we note is conspicuous by its absence -- and its presence in any grand manner except as far as I could see, one lousy photomicrograph, is distinctly miniscule. When something like this happens every grandiose declaration by the company supposedly designed to lend credence begins to have the distinct ring of a three dollar coin on a hollywood movie set. A loud and phony clatter.
The revelation of this little debacle, and I don't think it is a grand market shaker, is also a tad weak. There is no great number of twinned holes, no pervasive and authoritative third party consultant's forensic investigation, just some allegations by the company itself without any presented evidence.
I am not sure where Zhang stepped into the picture. Back in August or perhaps June 2004 he seemed to appear in association with a group that may well become notorious, Team 209, the JV partners and the people doing the small scale mining. Formerly two other people leading the exploration group noted in March 2004 with Paterson, were Charlie Cheng from UBC and a Xianda Wang from Salzburg University.
If Team 209 is implicated in a scam, and it is premature to say so, but hypothetically, and Zhang is part of it, the stories about miners coming out of tunnels with gold could be a made-out-of-whole-cloth sort of thing.
A number of companies have had China problems. They vary from routine corruption about who is supposed to own the property, to getting the property at all if it is too high grade, as normally the Chinese government cuts back high grade properties to domestic entities only. Low grade is for foreigners. SWG's Boka is an exception.
I think this little foray into Bre-X integrity, if it matures into a real farce may shake China plays, dry up liquidity in that country, and cause a flight to domestic quality and near term producers. Probably a godsend in the final analysis. I can't tell you how many times I have heard brokers tell me that they could not look a real mine in Canada because they had all these China plays that were do good on their plate. 3 or 4 in the last week alone, and in the last year, well let's say quite a few market blowouts - pump and dump schemes. Many China plays may be just that, although I think many operators are legitimate, without doubt. The Chinese mining game is real enough. They have quite a few porphyry copper plays. But I don't see after 5 years, many people over there starting mines. I don't see people anywhere starting anything like a mine in many places for that matter. I like the idea of that, and that is why our properties emphasize that possibility, from an ore-ecomonic and capex standpoint.
Between China deals gone bad, no high grade, problems with ownership, bad South American governments, confiscatory overseas tax regimes, just plain higher costs, it is high time investors and brokers learned to stay in jurisdictions that make sense and have good track records and money repatriation possibilities. No 10% dead money partnership with arbitrary governments and no 50% tax schemes or worse. No 3 person ownership of a claim or the best bribe wins. No 10,000 galamsay mining the property with ak47's. Let's keep it peaceful and mine with the devils we know instead of the devils we don't. Let's face facts, I know many domestic plays are pump and dump, but if one can't see the brokers plans for China plays from the get go, I think one needs glasses bad.
The trick going into a new country is to find a way to make money there and get it out. No one, not even Motorola has demonstrated conclusively that they can do that well. I will admit that retailers have been making things in China since the 70's and probably making fair profit. But in the mining game it appears to be structured differently. I am not sure exactly what the reason is, but countries are very jealous about their resources. The one exception seems to be Canada, who will let a kid come in a buy any mine in the country for lollipop money.
Paterson's seems to be troubling in his role as explo manager. He had the position where he should have had oversight from the beginning. Either he was in on the scam, or he should have had procedures in place to make it very much harder to do, and he did not perform ...
It is early days in this play. The company must make a clean breast of it. I think the let it play out in the market for the reason that they wanted to see what level they could maintain based on their other properties.. giving them the benefit of the doubt.
EC<:-} |
